Monday, March 20, 2017

During
the year leading up to the last Presidential election, we heard a lot about
bringing back jobs to the United States.
But what we didn’t hear much about was the increasingly important role
that automation and artificial intelligence (AI) will have on the country’s job
base, especially its potential impact on the housing market.

At
first glance, the numbers are sobering:
According to former President Obama’s final Economic Report of the President
to Congress dated February 2016, up to 83 percent of jobs which pay under $20
per hour would be the first job dominoes to eventually fall to automation.

While
most of these types of jobs wouldn’t qualify workers to purchase a
median-priced home in most areas, up to 31 percent of jobs paying $20 to $40
per hour will be next, and these are the types of jobs which allow many workers
to grab that first rung of the home buying ladder. However,
for those workers earning more than $40 per hour – typically the main draw for
move-up housing -- their focus on creativity, innovation and often complex
communications will mean that just four percent of their jobs would be easily
automated away.

In fact, many economists
have argued that it is automation, not outsourcing to other countries, which
has led to the loss of most manufacturing jobs over the last few decades,
especially in the auto industry.

In the
short run, the job market seems to be booming, with private employment growth
rising in February 2017 at the fastest rate since April 2014, with nearly
300,000 new positions created.

Yet
according to a Pew Research poll conducted in 2014, about half of the
technology experts contacted expressed concern that emerging technology will
displace more jobs that it will create as soon as 2025.
Still, the other half were more optimistic,
concluding that human ingenuity will continue innovating new jobs and entire
industries, much as it has done since the dawn of the Industrial Revolution.

Even if
these changes are rolled out over time, economic inequality may increase to the
point that government needs to step in to prevent social unrest.

One potential solution could be a Universal
Basic Income, once championed by those on both sides of the political spectrum,
and almost signed into law during the time of former President Nixon. The idea is that by providing citizens with
enough income to survive irrespective of need, they can then focus on
alternative pursuits, whether that’s in the form of volunteering in the
communities, caring for family members or starting new businesses.

However,
since that could also mean those receiving this free money simply sit home and
do nothing, opponents suggest that a program such as the existing Earned Income
Tax Credit is a better solution, since history has demonstrated that when
people have a job – even one without a high wage – communities are generally
safer and more stable.

To leverage
existing infrastructure, another option might be to expand the Supplemental
Security Income (SSI) program, which was launched in the 1970s to replace
several other programs and currently covers over 5.5 million persons. Waste, fraud and abuse could also be
curtailed with a single, simplified process.

Whatever
it is called, the idea of a floor-level income is currently being tested in
several countries including Finland, Brazil and The Netherlands as well as in
the City of Oakland, California by Y Combinator, a start-up incubator which has
a vested interest in preventing future social backlashes from the potentially
job-taking technology companies it helps to found.

When similar trials were previously conducted
in Canada, India and Namibia, social markers including health, education and
nutrition improved while poverty levels, crime and emergency hospital visits
declined.

So what
impact could these technological changes and social programs have on housing?
In the short- to medium-turn, focusing on those regions with the most
technology-related jobs would be a great defensive move.

According to leasing giant CBRE Group’s
annual Scoring Tech Talent report for 2016, these areas include not just the
usual suspects such as California’s Bay Area, Seattle and Austin, but also
Charlotte, Nashville, Baltimore and Oklahoma City.

In the
longer term, another defensive move would be planning for the potential day
when families, or groups of individuals, aggregate their basic incomes in order
to qualify for both rental and for-sale housing.

In that case, because they will no longer be
reliant on jobs in traditional city centers, their ability to live anywhere
they choose could greatly expand the geographic reach of today’s homebuilding
footprint.